Guest Opinion: Students are becoming indentured servants

Thursday

Apr 24, 2014 at 5:22 PM

In 2005, a Republican-controlled congress under President George W. Bush, with strong support from the financial sector, for-profit colleges, and collection agencies, passed draconian legislation which is putting more and more students into debt that they may never get out of. The Republican-controlled Congress in 2005 removed bankruptcy protections to those who hold college loans. This despite the fact that student bankruptcy from student loans was at 1 percent, which is about the same that was found in the rest of society.

Kenneth Pottel

In 2005, a Republican-controlled Congress, under President George W. Bush, with strong support from the financial sector, for-profit colleges, and collection agencies, passed draconian legislation which is putting more and more students into debt that they may never get out of. The Republican-controlled Congress in 2005 removed bankruptcy protections to those who hold college loans. This despite the fact that student bankruptcy from student loans was at 1 percent, which is about the same that was found in the rest of society.

The result of this law has resulted in inflating the cost of education. Predatory lending practices have become common, particularly at for-profit colleges. We now have over 7 million students who have graduated or left college who are in default, with many facing a life with little chance of lifting themselves out of debt. Legislation passed by Congress has put many students into financial peril.

According to studentloan.org, the law passed by Congress not only prohibits bankruptcy, but also contains severe measures meant to protect the finance industry and the federal government. In addition, Congress included in the law that students would be denied refinancing rights, statute of limitations protection, truth in lending requirements, fair debt collection practice requirements, and even made it so that state laws dealing with students loans were subject to the new federal law.

Collection practices included in the law engage collection agencies to wage garnishment, attaching tax returns, attaching Social Security payments, disability income garnishments, suspension of state issued professional licenses, termination from public employment and other predatory practices. In addition, Congress established a fee system that allows the creditors to attach a 20 percent fee to loans that are in default, as well as the interest and principle. Students who take out college loans should not be discriminated against and Congress should act immediately to bring fairness to the college loan crisis.

In his book, “The Price of Inequality,” Joseph E. Stiglitz, winner of the Nobel Peace Prize in Economics believes the 2005 bankruptcy law made it impossible to declare bankruptcy, which resulted in doing away with any incentives for banks as well as the federal government to provide loans for an education that will result in student success.

When reforms were advanced that would tie graduation rates and successful jobs to student loans, the banks, credit agencies, and for-profit schools fought back and were successful in preventing reforms. We have a system in place with for-profit schools where 90 percent of their funding ($26 billion) comes from the federal government and, with their lobbyists hard at work, a corrupt system that preys on students will remain in place.

The question that should be asked is why a country would allow an industry to prey on students in this fashion. The answer is that in 2005, both branches of Congress and the presidency were under the control of the Republican Party, which had strong ties to the finance sector. The Democrats share some responsibility because when they regained control of Congress, they failed to enact meaningful reforms. Currently the finance industry, collection agencies, and for-profit colleges have a stranglehold on Congress with more lobbyists then members of congress.

This has occurred despite the fact that the federal government has taken the lead in giving out loans to almost anyone who applies. Last year, the federal government earned a profit from student loans of over $50 billion.

Unfortunately, with the House of Representatives under the control of the Republicans, there is little hope that any changes will come soon.

The result will be that predatory practices will continue, for-profit colleges will continue to hand out loans at record rates, and more and more students will be in default and the growing inequality in our country will continue unabated. For more information on this topic, read U.S. Sen. Elizabeth Warren’s book, “ A Fighting Chance” and check us out on our Facebook page, Citizens for Economic Justice.

Kenneth Pottel is a Fairhaven resident and a member of Citizens for Economic Justice.